C » Topics » Tenants Right of Self-Help and Offset

These excerpts taken from the C 10-K filed Feb 22, 2008.

Tenant’s Right of Self-Help and Offset

42.01. (a) Subject to the provisions of this Article 42, if Landlord fails to perform or provide in accordance with the provisions of this lease any item of work, maintenance, or repair or service with respect to (i) items that are exclusively located within the Premises or (ii) items which exclusively serve the Premises, Tenant shall have the right (but not the obligation) to perform and fulfill Landlord’s obligation with respect

 

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thereto (and Tenant shall have access to those portions of the Real Property and Building outside of the Premises which service the Premises in order to do so). The extent of the work performed by Tenant in curing any such default by Landlord shall not exceed the work that is reasonably necessary to effectuate such remedy and the third party cost of such work shall be reasonably prudent and economical under the circumstances and reasonably documented. Notwithstanding anything to the contrary contained herein, Tenant shall not be entitled to cure any default of Landlord if (A) such cure requires access to the premises of other tenants or occupants of the Building unless Tenant shall have first obtained the prior written consent of any such tenant or occupant, or (B) the performance of such cure would require access to Building systems that service tenants other than Tenant or in addition to Tenant or would impair or disrupt services to the tenants of the Building, unless, in either case, Tenant shall have first obtained the prior written consent of such other tenants of the Building and Tenant shall have submitted copies of such consent(s) to Landlord before entering such space or accessing Building systems, as the case may be. The defaults of Landlord that Tenant is permitted to cure in accordance with the provisions of this Section 42.01(a) are hereinafter referred to as “Self-Help Items.”

(b) If Tenant believes that Landlord has failed to perform any Self-Help Item as required by this lease, Tenant may give Landlord a notice (herein called the “Self-Help Notice”) of Tenant’s intention to perform such Self-Help Item on Landlord’s behalf, which notice shall contain a statement in bold type and capital letters stating “THIS IS A SELF-HELP NOTICE” as a condition to the effectiveness thereof. If Landlord fails within two (2) Business Days after its receipt of such Self-Help Notice (or within one (1) Business Day after its receipt of such Self-Help Notice in the event that such failure is causing a material disruption of Tenant’s business) to either (i) commence (and thereafter continue to diligently perform) the cure of such Self-Help Item or (ii) give a notice to Tenant (herein called “Landlord’s Self-Help Dispute Notice”) disputing Tenant’s right to perform the cure of such Self-Help Item pursuant to the terms of this Article 42, Tenant shall have the right, but not the obligation, to commence and thereafter diligently prosecute the cure of such Self-Help Item in accordance with the provisions of this Article 42 at any time thereafter, but prior to the date on which Landlord either commences to cure such Self-Help Item or gives to Tenant a Landlord’s Self-Help Dispute Notice. If either (A) within such two (2) Business Day period (or one (1) Business Day period, if applicable) or at any time thereafter prior to the date on which Tenant commences to cure such Self-Help Item, Landlord gives a Landlord’s Self-Help Dispute Notice, or (B) Tenant disputes whether Landlord has commenced to cure or is diligently proceeding with the cure of such Self-Help Item, Tenant may commence an arbitration by the American Arbitration Association pursuant to its Guidelines for Expedited Arbitration (herein called a “Self-Help Arbitration”). Such arbitration shall make a determination as to either (1) whether Landlord has failed to commence or has been and is then continuing to fail to diligently prosecute the Self-Help Item in question or (2) whether Tenant has the right pursuant to the terms of this Article 42 to cure such Self-Help Item. If Tenant shall prevail in such arbitration, Tenant may perform the cure

 

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of such Self-Help Item. Upon completion of the cure of such Self-Help Item, as provided herein, by Tenant, Tenant shall give notice thereof (the “Self-Help Item Completion Notice”) to Landlord (which notice shall contain a statement in bold type and capital letters stating “THIS IS A SELF-HELP ITEM COMPLETION NOTICE” as a condition to the effectiveness thereof), together with a copy of paid invoices setting forth the reasonable third party costs and expenses incurred by Tenant to complete such Self-Help Item (herein called the “Self-Help Amount”). Landlord shall reimburse Tenant in the amount of the Self-Help Amount within thirty (30) days after receipt of Tenant’s Self-Help Item Completion Notice, together with interest thereon at the Base Rate from the date same were incurred through the date of reimbursement. In the event that Landlord shall fail to pay the Self-Help Amount within such thirty (30) day period, Tenant shall be entitled to offset the Self-Help Amount, together with interest thereon at the Base Rate from the date same were incurred through the date of offset, against Fixed Rent and Additional Charges thereafter coming due under this lease. Notwithstanding the foregoing, Tenant shall not have the right to credit such amount against the Fixed Rent and Additional Charges thereafter coming due hereunder if Landlord initiates a Self-Help Arbitration, if and to the extent that such Self-Help Arbitration challenges the Self-Help Amount claimed by Tenant. If and to the extent that Tenant prevails in such Self-Help Arbitration, Tenant shall have the right to credit against the Fixed Rent and Additional Charges thereafter coming due hereunder (with interest at the Base Rate from the expiration of the above-referenced thirty (30) day period until the date that such credit is taken) any portion of the finally determined Self-Help Amount not theretofore paid to Tenant or taken as a credit by Tenant. Notwithstanding anything to the contrary contained herein, in the event that Landlord shall dispute Tenant’s right to perform the cure of any Self-Help Item by giving a Landlord’s Self-Help Dispute Notice in accordance with the procedures set forth in this Section 44.01, Tenant shall nevertheless have the right to perform the cure of such Self-Help Item pending the resolution of such dispute in the event that any further delay in the performance of such cure would cause a material disruption of Tenant’s business; provided, however, that Landlord shall not be obligated to make payment of the Self-Help Amount (or any interest thereon), nor shall Tenant have the offset rights hereinabove described, unless and until such dispute is resolved (pursuant to a Self-Help Arbitration or otherwise) in Tenant’s favor (and in such event such Self-Help Amount shall be in the amount so determined pursuant to such resolution), and provided further that subject to Section 9.04, Tenant shall indemnify Landlord and each Landlord Party from and against any and all claims arising from or in connection with the exercise of its rights under this Article 42, including, without limitation, any claims made by any other tenants or occupants of the Building, together with all reasonable, actual out-of-pocket costs, expenses and liabilities incurred in or in connection with each such claim or action or proceeding brought thereon, including, without limitation, all reasonable attorneys’ fees and expenses.

42.02. With respect to any Self-Help Item to which Tenant is effectuating a cure pursuant to this Article 42, Landlord shall sign, to the extent required, all

 

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applicable applications for building permits within two (2) Business Days following Tenant’s submission of such applications.

42.03. The provisions of this Article 42 shall not limit Tenant’s rights under Article 46, and any conflict or inconsistency between said Articles shall be governed by Article 46.

ARTICLE 43

[Intentionally Omitted]

ARTICLE 44

Right Of First Offer To Purchase21

44.01. (a) If during the Initial Lease Term, Landlord desires to sell all or any portion of the Premises, whether in an asset transaction or, in substance, as a transfer of ownership interests, directly or indirectly, pertaining to the Premises, in a transaction intended to affect interests in the Premises as distinguished from all or substantially all of Landlord’s and its affiliates’ business interests, unless all or substantially all of said interests relate primarily to Landlord’s interest in the Premises (in either case, herein called the “Offered Property”), subject to the provisions of Section 44.03, Landlord shall give Tenant a notice (herein called the “Offering Notice”) offering to sell the Offered Property to Tenant at the purchase price (the “Offer Price”) and on the terms and conditions contained therein. Within thirty (30) days after the Offering Notice is given to Tenant (herein called the “Option Period”), Tenant shall elect, by notice to Landlord, to either (i) purchase the Offered Property on the terms contained in the Offering Notice (without any substantive change whatsoever) or (ii) refuse to purchase the Offered Property as herein provided. Time shall be of the essence with respect to Tenant’s election, and any failure by Tenant to notify Landlord of its election shall be deemed to be an election to refuse, and a waiver of Tenant’s right, to purchase the Offered Property in response to such Offering Notice (but not a waiver of any other rights that Tenant may have pursuant to this Article 44 in connection therewith). Landlord shall not be permitted to revoke the Offering Notice during the Option Period, but the Offering Notice shall be deemed to be revoked during the Option Period if Landlord and Tenant or its designee enter into a purchase agreement on terms different than those contained in the Offering Notice. If Tenant desires to purchase the Offered Property, Tenant and Landlord shall enter into a purchase agreement, the form of which shall be negotiated in good faith by the parties and must include the terms set forth in the Offering Notice and the Terms set forth in Section 44.01(b) (the “Offer Contract”). The Offer Contract must

 

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Article 44 shall only be included if this lease comes into effect during the Original Term as a result of Tenant’s exercise of the Insurance Election.

 

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be entered into within thirty (30) days following the expiration of the Option Period. Notwithstanding the foregoing, if the parties are not able to agree upon a final form of the Offer Contract within said thirty (30) day period, upon the request of either party, the final form of Offer Contract may be determined by expedited arbitration in accordance with Article 37 hereof. To provide further assurances for the parties, at any time prior to the execution of a contract with a third-party purchaser for a sale of ownership interests, Landlord shall have the right to give a written notice to Tenant, requesting that Tenant advise Landlord as to whether Tenant believes that such a sale would constitute a sale of the Offered Property as contemplated by the first sentence of this Section 44.01(a), and Tenant shall respond to any such request of Landlord within ten (10) Business Days after receipt of same (time being of the essence with respect to such response), failing which the transaction in question shall not be deemed a sale subject to this Article 44.

(b) Among other matters, the Offer Contract shall incorporate the following (“Terms”):

(i) a closing date that is thirty (30) days following the date of the Offer Contract;

(ii) the Offer Price shall be payable either solely in lawful money of the United States or, if not payable in its entirety in cash, then any other consideration must be of a type readily obtainable by Tenant;

(iii) the deposit required to bind the Offer Contract shall equal five percent (5%) of the Offer Price;

(iv) that the seller will deliver the Offered Property to the buyer on the proposed closing date free of any liens (other than the lien of any first mortgage and other financing of Landlord’s interest in the Premises if such term was set forth as a requirement of the buyer to assume in the Offering Notice, and other than any liens existing on the date of this lease and any liens created or arising from the acts of Tenant or its agents, or anyone claiming by or through such parties); and

(v) that the Landlord shall not be required to give any representation or warranty regarding the Premises or this lease.

44.02. (a) If Tenant shall refuse (or shall be deemed to have refused) to purchase the Offered Property pursuant to this Article 44, then Landlord may undertake to complete the transfer of the Offered Property to a third party purchaser. Such transfer shall not be undertaken at a price which is not “substantially the same” as the Offer Price. For purposes hereof, “substantially the same” shall mean that the purchase price to be paid by the prospective buyer shall be no less than ninety percent (90%) of the Offer Price taking into account all material relevant economic matters, including, without limitation, the payment of the purchase price in its entirety in cash

 

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(subject to any assumption of any financing by buyer, if any, in accordance with the parenthetical set forth in Section 44.01(b)(iv)) and a closing date of no more than thirty (30) days following the execution and delivery of the subject contract of sale. If Landlord does not then consummate the proposed transfer to the third party purchaser in accordance with the foregoing within twelve (12) months after the date of Tenant’s refusal or deemed refusal to purchase, and if a sale of the Offered Property is desired by Landlord after such period, Landlord must again offer the Offered Property to Tenant pursuant to Section 44.01(a). In addition, if Tenant shall refuse (or shall be deemed to have refused) to purchase the Offered Property pursuant to this Article 44 and thereafter within such six (6) month period Landlord desires to consummate a transaction in which the purchase price is not substantially the same as the Offer Price (hereinafter called the “Lower Price”), Landlord shall, prior to consummation of such transaction, deliver to Tenant a notice specifying the terms of such transaction, and such notice shall constitute an Offering Notice pursuant to which Landlord re-offers the Offered Property to Tenant pursuant to Section 44.01(a) at the Lower Price and otherwise on all the same terms set forth in said notice.

(b) If Tenant has refused or is deemed to have refused to purchase the Offered Property, Landlord shall, not less than ten (10) Business Days preceding a closing with a third party purchaser, deliver a notice to Tenant together with a fully executed copy of the contract of sale (and all amendments and exhibits thereto) and side letters and pertinent agreements, with such third party purchaser and its affiliates. Tenant shall, in writing and within five (5) Business Days after the delivery of such notice by Landlord, confirm or dispute that a specified purchase price is substantially the same as the Offer Price. Time shall be of the essence with respect to such notice from Tenant to Landlord and any failure to notify Landlord within such five (5) Business Day period shall be deemed for all purposes and as against all parties as Tenant’s agreement that the purchase price is substantially the same as the Offer Price. If Landlord fails to comply with its obligations pursuant to Section 44.02(a) or pursuant to this Section 44.02(b), Tenant may pursue any and all legal (but not equitable) rights and remedies that it may have in connection therewith.

44.03. Tenant’s rights granted under this Article 44 shall not apply to (a) a conveyance or assignment to an Affiliate of Landlord, (b) a transfer of up to fifty percent (50%) of the ownership interests directly or indirectly pertaining to the Premises to an unaffiliated third party, (c) to the sale to the purchaser at a foreclosure sale in connection with the foreclosure or to any sale pursuant to a bankruptcy proceeding or an order of a bankruptcy court, (d) to the conveyance or assignment to Superior Mortgagee or any designee of Superior Mortgagee in connection with a deed in lieu of foreclosure of the Mortgage, (e) a sale of interests in Landlord or an Affiliate of Landlord pursuant to a pledge of such interests to secure “mezzanine debt” or a transfer in lieu of any such sale or (f) any direct or indirect transfer, sale or pledge (including (but not limited to) by way of any merger, consolidation, amalgamation, sale, or other transfer of any kind) of the legal or beneficial interests (including, without limitation, any rights, distributions, profits

 

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or proceeds relating thereto) or assets of the parent entities (or other upper tier level entities) which comprise the indirect members of the Landlord entity; provided that any such transfer, sale or pledge is done for a good business purpose and not principally for the purpose of selling the Premises or any portion thereof or any interest therein to circumvent Tenant’s rights granted under this Article 44 or (g) transfers of the direct or indirect interests in the Landlord entity between its existing holders (as of the date of the Original Lease) of direct or indirect interests in the Landlord entity; it being understood and agreed that the foregoing shall not vitiate Landlord’s rights under clause (b) of this Section 44.03. Tenant’s rights hereunder shall survive any sale or transfer described in this Section 44.03.

44.04. Notwithstanding anything to the contrary in this Article 44, any transfer of the Offered Property pursuant to this Article shall be subject to this lease (i.e., Tenant shall retain its rights under this Article 44 following any and all transfers of the Offered Property during the Term), any subleases and any defects created, arising or resulting from any acts of Tenant or any assignee or subtenant of Tenant, and Landlord shall make no representations, warranties or covenants concerning same to Tenant or its assignee or subtenant.

44.05. Tenant shall keep confidential all information it receives with respect to the Offered Property or contained in any Offering Notice or any contract of sale submitted hereunder (except that Tenant may disclose such information (i) to such of its executive officers, employees and professional advisors as are reasonably required in connection with the analysis of the Offered Property, (ii) in connection with any arbitration or suit regarding same, and (iii) as may be required by law), provided that Tenant’s obligations pursuant to this Section 44.05 shall terminate after closing of the purchase of the Offered Property by Tenant (but otherwise Tenant’s obligations pursuant to this Section 44.05 shall survive).

44.06. Tenant agrees, at any time and from time to time after the rights to Tenant under this Article 44 are no longer in effect as to any particular transaction, as requested by Landlord with not less than ten (10) Business Days’ prior notice, to execute and deliver to Landlord a statement certifying that the rights granted to Tenant under this Article 44 are no longer in effect, it being intended that any such statement delivered pursuant hereto shall be deemed a representation and warranty to be relied upon by Landlord and others with whom Landlord may be dealing, regardless of independent investigation; provided, however, the reliance referred to herein shall be limited to Tenant being estopped from contradicting any of the statements made in such certificate.

44.07. The provisions of this Article 44 shall be null and void if either (i) the Tenant under this Lease is no longer a Citigroup Tenant or (ii) the Named Tenant together with its Affiliates does not then occupy at least 80% of the Premises.

 

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ARTICLE 45

Tenant’s Right of Self-Help and Offset

42.01. (a) Subject to the provisions of this Article 42, if Landlord fails to perform or provide in accordance with the provisions of this lease any item of work, maintenance, or repair or service with respect to (i) items that are exclusively located within the Premises or (ii) items which exclusively serve the Premises, Tenant shall have the right (but not the obligation) to perform and fulfill Landlord’s obligation with respect thereto (and Tenant shall have access to those portions of the Real Property and Building outside of the Premises which service the Premises in order to do so). The extent of the work performed by Tenant in curing any such default by Landlord shall not exceed the work that is reasonably necessary to effectuate such remedy and the cost of such work shall be reasonably prudent and economical under the circumstances; provided that if Tenant shall in good faith competitively bid such work (but Tenant shall have no obligation hereunder to bid such work) to at least three (3) bidders, then the middle bid obtained shall be deemed to be reasonably prudent and economical. Notwithstanding anything to the contrary contained herein, Tenant shall not be entitled to cure any default of Landlord if (A) such cure requires access to the premises of other tenants or occupants of the Building unless Tenant shall have first obtained the prior written consent of any such tenant or occupant, or (B) the performance of such cure would require access to Building systems that service tenants other than Tenant or in addition to Tenant or would impair or disrupt services to the tenants of the Building, unless, in either case, Tenant shall have first obtained the prior written consent of such other tenants of the Building and Tenant shall have submitted copies of such consent(s) to Landlord before entering such space or accessing Building systems, as the case may be. The defaults of Landlord that Tenant is permitted to cure in accordance with the provisions of this Section 42.01(a) are hereinafter referred to as “Self-Help Items.”

(b) If Tenant believes that Landlord has failed to perform any Self-Help Item as required by this lease, Tenant may give Landlord a notice (herein called the “Self-Help Notice”) of Tenant’s intention to perform such Self-Help Item on

 

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Landlord’s behalf, which notice shall contain a statement in bold type and capital letters stating “THIS IS A SELF-HELP NOTICE” as a condition to the effectiveness thereof. If Landlord fails within two (2) Business Days after its receipt of such Self-Help Notice (or within one (1) Business Day after its receipt of such Self-Help Notice in the event that such failure is causing a material disruption of Tenant’s business) to either (i) commence (and thereafter continue to diligently perform) the cure of such Self-Help Item or (ii) give a notice to Tenant (herein called “Landlord’s Self-Help Dispute Notice”) disputing Tenant’s right to perform the cure of such Self-Help Item pursuant to the terms of this Article 42, Tenant shall have the right, but not the obligation, to commence and thereafter diligently prosecute the cure of such Self-Help Item in accordance with the provisions of this Article 42 at any time thereafter, but prior to the date on which Landlord either commences to cure such Self-Help Item or gives to Tenant a Landlord’s Self-Help Dispute Notice. If either (A) within such two (2) Business Day period (or one (1) Business Day period, if applicable) or at any time thereafter prior to the date on which Tenant commences to cure such Self-Help Item, Landlord gives a Landlord’s Self-Help Dispute Notice, or (B) Tenant disputes whether Landlord has commenced to cure or is diligently proceeding with the cure of such Self-Help Item, Tenant may commence an arbitration by the American Arbitration Association pursuant to its Guidelines for Expedited Arbitration (herein called a “Self-Help Arbitration”). Such arbitration shall make a determination as to either (1) whether Landlord has failed to commence or has been and is then continuing to fail to diligently prosecute the Self-Help Item in question or (2) whether Tenant has the right pursuant to the terms of this Article 42 to cure such Self-Help Item. If Tenant shall prevail in such arbitration, Tenant may perform the cure of such Self-Help Item. Upon completion of the cure of such Self-Help Item, as provided herein, by Tenant, Tenant shall give notice thereof (the “Self-Help Item Completion Notice”) to Landlord (which notice shall contain a statement in bold type and capital letters stating “THIS IS A SELF-HELP ITEM COMPLETION NOTICE” as a condition to the effectiveness thereof), together with a copy of paid invoices setting forth the reasonable costs and expenses incurred by Tenant to complete such Self-Help Item (herein called the “Self-Help Amount”). Landlord shall reimburse Tenant in the amount of the Self-Help Amount within thirty (30) days after receipt of Tenant’s Self-Help Item Completion Notice, together with interest thereon at the Base Rate from the date same were incurred through the date of reimbursement. In the event that Landlord shall fail to pay the Self-Help Amount within such thirty (30) day period, Tenant shall be entitled to offset the Self-Help Amount, together with interest thereon at the Base Rate from the date same were incurred through the date of offset, against Fixed Rent and Additional Charges thereafter coming due under this lease. Notwithstanding the foregoing, Tenant shall not have the right to credit such amount against the Fixed Rent and Additional Charges thereafter coming due hereunder if Landlord initiates a Self-Help Arbitration, if and to the extent that such Self-Help Arbitration challenges the Self-Help Amount claimed by Tenant. If and to the extent that Tenant prevails in such Self-Help Arbitration, Tenant shall have the right to credit against the Fixed Rent and Additional Charges thereafter coming due hereunder (with interest at the Base Rate from the expiration of the above-referenced thirty (30) day period until the date that such credit is taken) any portion of the

 

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finally determined Self-Help Amount not theretofore paid to Tenant or taken as a credit by Tenant. Notwithstanding anything to the contrary contained herein, in the event that Landlord shall dispute Tenant’s right to perform the cure of any Self-Help Item by giving a Landlord’s Self-Help Dispute Notice in accordance with the procedures set forth in this Section 44.01, Tenant shall nevertheless have the right to perform the cure of such Self-Help Item pending the resolution of such dispute in the event that any further delay in the performance of such cure would cause a material disruption of Tenant’s business; provided, however, that Landlord shall not be obligated to make payment of the Self-Help Amount (or any interest thereon), nor shall Tenant have the offset rights hereinabove described, unless and until such dispute is resolved (pursuant to a Self-Help Arbitration or otherwise) in Tenant’s favor (and in such event such Self-Help Amount shall be in the amount so determined pursuant to such resolution), and provided further that subject to Section 9.04, Tenant shall indemnify Landlord and each Landlord Party from and against any and all claims arising from or in connection with the exercise of its rights under this Article 42, including, without limitation, any claims made by any other tenants or occupants of the Building, together with all reasonable, actual out-of-pocket costs, expenses and liabilities incurred in or in connection with each such claim or action or proceeding brought thereon, including, without limitation, all reasonable attorneys’ fees and expenses.

42.02. With respect to any Self-Help Item to which Tenant is effectuating a cure pursuant to this Article 42, Landlord shall sign, to the extent required, all applicable applications for building permits within two (2) Business Days following Tenant’s submission of such applications.

42.03. The provisions of this Article 42 shall not limit Tenant’s rights under Article 46, and any conflict or inconsistency between said Articles shall be governed by Article 46.

ARTICLE 43

EXCERPTS ON THIS PAGE:

10-K (2 sections)
Feb 22, 2008
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